First Interstate BancSystem, Inc.

Hello and welcome to the first Interstate Bank System Incorporated Second Quarter Earnings Conference Call. My name is Harry and I'll be coordinating your call today. If you'd like to ask a question during the question and answer session, you would do so by pressing star followed by one on your telephone keypad. I'd now like to hand you over to our first speaker, Lisa Slides of Bray, to begin. Lisa, please go ahead.

Thanks, Harry. Good morning. Thank you for joining us for our Second Quarter Earnings Conference Call. As we begin, please note that the information provided during this call will contain forward-looking statements. Actual results or outcomes may differ materially from those expressed by those statements. I'd like to direct all listeners to read the cautionary note regarding forward-looking statements contained in our most recent annual report on Form 10-K filed with the SEC and in our earnings release, as well as the risk factors identified in the annual report in our more recent periodic reports filed with the SEC. Relevant factors that could cause actual results to differ materially from any forward-looking statements are included in the earnings release and in our SEC filings. The company does not undertake to update any forward-looking statements made today. A copy of our earnings release, which contains non-GAAP financial measures, is available on our website at fibk.com. Information regarding our use of the non-GAAP financial measures may be found in the body of the earnings release and a reconciliation to their most directly comparable gap financial measures is included at the end of the earnings release for your reference. Joining us for management this morning are Kevin Riley, our Chief Executive Officer, and Marcy Mutch, our Chief Financial Officer, along with other members of our management team. At this time, I'll turn the call over to Kevin Riley. Kevin?

Thanks, Lisa. Good morning, and thanks again to all of you for joining us on our call today. Again this quarter, along with our earnings release, we have published an updated investor presentation that has additional disclosures that we believe will be helpful. The presentation can be accessed on our investor relations website, and if you have not downloaded a copy yet, I encourage you to do so. I'm going to start today by providing an overview of the major highlights of the quarter, and then I'll turn the call over to Marcie to provide more details on our financial. I'm very pleased with our performance this quarter. We had good contribution from the entire team across our footprint, resulting in accelerated loan growth, significant expansion in our net interest margin, and further improvement in asset quality, in addition to successfully executing on the Great Western Core system conversion. All of this resulted in a substantial increase in our profitability as we generated 92 cents in earnings per share, excluding acquisition-related expenses and some other items. We are starting to see the benefits of our increased scale following the merger, particularly given our strong revenue growth as our adjusted efficiency ratio improved to 50.8 percent from 62.2 percent from the prior quarter. Underlying our strong performance are healthy economic conditions throughout our markets. which contributed to 6.4 percent annualized loan growth, excluding PPP loans. In the second quarter, our loan production was 30 percent higher than the prior period, with growth accelerating as the quarter progressed, ending with 10 percent annualized growth in the month of June. Our well-balanced production resulted in increases in most of the major portfolios. Headed into the third quarter, We are capitalizing on this momentum, and we have a strong pipeline going into the second half of the year. We are particularly pleased with the higher level of growth we are seeing in the legacy First Interstate footprint, with every market contributing positively, including Wyoming, which, as you know, was a headwind last year. Overall, the legacy First Interstate branch network had an annualized loan growth rate of 15% in the second quarter, with Montana, Idaho, eastern Washington markets leading the charge. As always, we are maintaining discipline in our pricing, and as a result, our new production reflected the impact of higher interest rates. The average rate on new loan production in the second quarter was 25 basis points higher than it was in the first quarter. As we discussed last quarter, We intended to deploy more of our excess liquidity into higher yielding assets, earning assets, both in loans and the investment portfolio. This allowed us to benefit from higher interest rates, resulting in a 45 basis points increase in our net interest margin. More importantly, our core net interest margin expanded 36 basis points to 3.01 percent. We saw a significant increase in our yield on earning assets while keeping our cost of funds flat with the prior quarter. While deposits declined a little bit more than we originally anticipated in the quarter, we were encouraged by the stickiness of our non-interest bearing and our interest bearing demand deposits and the performance of the legacy FIB footprint overall. During the quarter, a large portion of the attrition was discretionary on our part, as we chose not to retain expensive, non-relationship acquired balances. Additionally, we are taking a proactive and strategic approach to product and pricing in this environment to drive incremental client growth from here. With our strong financial performance and capital position, we were able to increase our return of capital to our shareholders during this second quarter with the resumption of our share repurchase activity. During the second quarter, we repurchased 1.7 million shares of our common stock at a weighted average price of $37.38 and paid a dividend yielding 4.6% on an annualized basis. And with that, I will turn the call over to Marcie to provide some additional details on the second quarter results. Go ahead, Marcie.